well shoot i was going to suggest the formatting to fat32, but i guess that's not the problem. There might be a maximum size (amount of gb's) the head-unit can handle. I know some aftermarket headunits can only handle so much (the one's I've seem that mention it mention 32gb max thumb-drives)
Also does it start up normally? I know you said it spins up and lights up, but does it seem to take longer than normal to fully spin up? it might be that the usb port isn't providing the full power that a normal usb port provides. those mobile usb powered hard drives usually need that full power to run.
btw,

to Toyota Nation!